Family Finances: How to Open Up Financial Communication in Your Family

Few of us don't worry about money at least sometimes. Here are some tips from Sharon Nolfi, a licensed marriage and family therapist and school psychologist, as well as a mom, on how to talk about finances with your kids in an age-appropriate way.

Unemployment. Salary reductions. Shrinking home values. Foreclosures. These problems are common today and threaten the well being of families everywhere. Parents face the additional challenge of explaining painful lifestyle changes to their children.

It's normal for parents to feel uncomfortable discussing money with their children. You wish to shield them from unpleasant realities. But this approach ignores your children's ability to sense problems from increased tension at home. Your silence or denial will only cause them to worry more and to imagine situations worse than those that actually exist.

Follow these tips to open up financial communication in your family so that all members can support one another through the tough times and work together towards effective solutions:

Be honest.

Your children most likely already know something is wrong, so don't make it harder for them by denying the reality they sense all around them. Your honesty will validate their fears as important and normal. Honesty is the first step towards gaining the cooperation of all family members.

Give age-appropriate explanations.

And use concrete examples. You may need to have a separate conversation with each child, because children of different ages will vary in their ability to understand. Emphasize concrete demonstrations and minimize abstract theory. For specific suggestions, see "Money Talk for Every Age," at right.

Ask them about their money concerns.

Your children's answers may surprise you, and will help you to address the real issues that may be bothering them. Never assume that you know what your child is thinking.

Ask for suggestions on saving money.

Children are more likely to follow a budget plan that they have a hand in creating. Listen and learn about their actual priorities before making spending cuts.

Be a good role model.

Follow your budget and demonstrate that you can reduce your own spending. Children will cooperate more if they see that your actions match your words.

Plan free family activities.

It's more important than ever to share happy times together. Think up free or low-cost alternatives

to your usual activities. Make a special effort to plan outings to free locations like parks and libraries. Look for discount coupons for other family attractions and take advantage of museums that offer "free admission" days. Bring snacks and lunch from home whenever possible. (Check out our calendar for plenty of ideas on keeping busy on a budget!)

Target sponsors free admission to cultural events and museums all over the New York metro area, such as at Wave Hill in the Bronx (pictured).

Worry away from the kids.

You are entitled to your feelings, but express them privately to your spouse or another adult. Children often wrongly assume that they are to blame for family problems, whether it's lack of money or even divorce. Reassure your children that they are in no way to blame for current circumstances. Emphasize that you, the adults, will find a solution to current difficulties.

Disagree with your spouse privately.

Fighting in front of the children will only increase the children's worries. Spouses blaming each other, whether children are present or not, seldom leads to the level of cooperation needed to solve problems.

Emphasize emotional security.

Real security is more about love than money. Explain to your children that finances may go up and down, but your concern for them remains constant. Demonstrate by your actions that they can depend on you emotionally.

Keep in mind that children are adaptive, resilient, and forgiving. Your family can survive and even flourish during bad economic times. The key to your child's experience of the difficulties is how you handle the situation.

Money Talk for Every Age

Pre-School and Kindergarten. Give a minimal explanation, starting with the idea that pennies have value beyond their use in counting or stacking. Explain how money is earned by working, and then exchanged for things we want and need. Use pennies and a piggy bank to show the difference between saving, where the money remains, and spending, where the money is gone.

Ages 6 to 12. Introduce the concept of budgeting, which simply means planning before spending. Start with several small-denomination bills and show how they can be sorted into piles in different ways for different expenses. Note that the total number of dollars remains constant. Discuss how certain necessities, like food and housing, must be paid for before spending on entertainment or new clothes. Emphasize that less income means less spending money.

Teenagers. Sit down with them and plan a budget for your family. Draw a pie chart where the total pie equals monthly income, and proportional slices show necessary expenses like food, housing, and transportation. See if anything is left over. Review the difference between necessary and discretionary expenses.